DAX Tests Resistance Trio Inside Bearish Flag Formation

Overview

The DAX index is currently exhibiting early signs of strength as the new trading week commences. However, it faces significant hurdles that must be overcome to confirm a bullish reversal. The index is situated within a bearish correction, characterized by a flag pattern defined by black trendlines, which follows a previous downward movement, maintaining an overall bearish structure.

Recent Price Action

Last week, the DAX breached a critical support level at the 24,200 zone, which is highlighted in yellow. This breach has led to increased downward pressure on the index. Additionally, the price has fallen below a previously established blue uptrend line, further contributing to the bearish sentiment.

Current Market Conditions

As of the late European trading session, the DAX is attempting a comeback, pressing against the upper boundary of the bearish flag. This movement suggests a potential breakout; however, it is not yet a confirmed signal for buyers.

Resistance Levels

The DAX is currently encountering a triple resistance zone, which includes:

• The upper black line of the flag
• The blue uptrend line (which has transitioned from support to resistance)
• The yellow horizontal level at 24,200, which is deemed the most critical resistance level

A clear breakout above the yellow horizontal resistance is necessary to trigger a long-term buy signal and shift market bias back in favor of bullish traders.

Market Sentiment

Until a breakout occurs, the current setup remains precarious. As long as the DAX remains below all three resistance levels, the sentiment will continue to lean negative, with sellers maintaining control over the market.